Treasury Wine Estates may want to sell, but would Pernod Ricard want to buy?

Treasury Wine Estates may want to sell, but would Pernod Ricard want to buy?

I'm sorry to bring you wine folk back down to earth ahead of the Mayday weekend. I just wouldn't want you getting excited about nothing over the next three days.

Reports this morning linking Pernod Ricard with Treasury Wine Estate's US wine assets got investors buzzing today. The reports stem from an interview The Australian newspaper ran with the head of Pernod Ricard Winemakers, Jean-Christophe Coutures, in which (and there's no direct quote on this) “Mr Coutures said Pernod would be interested in buying the US assets of Australian wine major Treasury Wine Estates”.

Following publication, Treasury's share price went a bit loo-lar, peaking at AUD4.38, having closed yesterday at AUD3.84. The jump prompted Treasury to inform the market that “it has not been approached by, and is not in discussions with, Pernod Ricard”.

Treasury's struggles in the US are well-documented and have hit so hard of late that it was as recently as last July that one analyst suggested the company pull out of the country altogether.

And, while you have Treasury's US travails in one hand, you have Pernod's recent US overtures in the other. Having bought California's Kenwood Vineyards last week, CFO Gilles Bogaert said on Thursday: “To have critical mass in the US you need to have US-origin wine.”

Put your hands together, then, and surely Pernod would consider Treasury's US assets, right?

Wrong.

Pernod may be delighted with its Kenwood buy, but if a company the size and scale of Treasury can't get the best out of its US brands, then what makes one think Pernod could?

Now, I'm not downplaying the importance - or potential - of the wine market in the US: Demand is strong in the country and is forecast to be the main driver of growth globally in the years ahead. But, don't be fooled, this isn't the easiest market in the world to sell wine in. Ask Treasury, if you don't believe me.

In recent years, Treasury has looked for acquirors for its operations on more than one occasion: It would be of little surprise were the firm to be looking again, specifically for its operations in the US. But, there is a big difference between wanting to sell and finding someone that wants to buy.

Ask Treasury, if you don't believe me.

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